1. What are the chief elements of Apple’s overall competitive strategy? How well do the pieces fit together? Is the strategy evolving? Apple has done an excellent job of developing a very distinct strategy through industry leading innovation. This strategy has allowed them to be the frontrunners in new product introductions and the improvement of existing products. Apple has employed a differentiation strategy in an attempt to meet the needs of a global market by offering customers innovative new products and improved existing products.
An important part of their strategy involves meeting the needs of the evolving digital electronics and computer markets. Apple has chosen to implement its strategy by designing and developing its own operating systems and software technologies. This has allowed them to be very flexible in developing new products as they have complete control over the software and hardware. I believe Apple’s strategy is still evolving in an effort to keep up with evolving technology. Initially, Apple sole focus was on the computer industry as they were introducing innovative products.
Apple continues to introduce innovative products in the computer industry, but recently has focused a great deal of strategic attention and resources on entering into the digital electronics and computer markets. This, along with the successful entry into the personal media player industry, marks a clear evolution in Apple’s strategy. Also, Apple’s entry into the tablet computer industry with its iPad and the mobile phone industry with its iPhone are evidence of a further evolving strategy.
2. What are the key elements of Apple’s strategy in computers, personal media players, and smartphones?
Have its strategies in its core businesses yielded success? Explain. As mentioned above, Apple’s has implemented a differentiation strategy and utilized it to create a profitable business in the computer, personal media player, and smartphone arenas. I believe there are three key elements in regards to Apple’s strategy in computers, and they are style, limited selection, and proprietary capabilities. When it comes to style, Apple is an industry leader, as it has been able to attract customers due to its products’ appearances. Apple has chose to go with a limited product line, o there are only a few number of computer models to choose from. Also Apple computers use technology and programs that are unique to Apple. Apple’s current strategy should enable it to continue to increase its sales because of the number of customers it has gained with their iPods and iPhones sales. These same customers will buy Apple’s computers because of the seamless integration. However, Apple has a long way to go to catch HP and Dell because of Apples high price tags, its lack of customization, and its limited number of business applications compared to HP and Dell.
The key components to Apple’s strategy in personal media players are once again its style, its online music store, and its first to market innovation. Apple has been able to turn its personal media players into a fashion statement, and it has been able to convince customers it is just more than just a music player. Its online music store is like none other in the industry and can be pointed to as the most integral part of the success it has experienced in this industry. Also, Apple has managed to leave its competition behind, as it has always been the first to bring new features to the market.
Apple’s success in the personal media player industry can be attributed to its ability to create loyalty from a huge customer base, the relationship it created between the iPod and iTunes, and its decision not to become content by what is has already accomplished. Apple continues to bring new features to the market and develop relationship with other key businesses that it has benefited from. Apple wasn’t the first to the market with it’s personal media player, but it is definitely become the most well known in the industry.
I believe three key elements in regards to Apples strategy when it comes to smartphones are its first to market innovation, its style, and is music store support. Once again Apple has been the first to the market when it comes to new features such as the touch screen, which has helped to keep its competition at arms length. Like all other Apple products, the smartphone is seen by many consumers in the industry as fashionable and a must have. Also Apple’s online music store support has also been a huge lift to its smartphones, as consumers can download music and thousands of applications.
Apple could make future strides in the smartphone industry, if it can figure out a way to steal away some market share from BlackyBerry users. Many business users prefer the BlackBerry to all other smartphones in the industry.
3. What does a competitive strength assessment reveal about Apple’s computer business, as compared to the leaders in the personal computer industry? Use the methodology in Table 4. 2 to support your answer. Does it appear that the company’s competitive positions in personal media players and smartphones are stronger or weaker than its position in computers?
As indicated in the table above, Dell and HP are the strongest players in the computer industry. These results are also supported by the market share statistics presented in case Exhibit 3. Conversely, the table above indicates Acer as the industry’s weakest rival in part because it focuses on producing low priced computers, which obviously results in a lower quality product. However, Acer has made some key acquisitions and is quickly becoming a major seller in geographic areas such as Europe, the Middle East and Africa.
Apple’s competitive position in the personal media player industry is much stronger than its position in the computer industry. The company held a 73% share of the digital music player industry in 2010. No other rival had been able to achieve a market share greater than 5% in 2010. In addition, its iTunes music store held a 69% share of the U. S. digital music market in 2010 and a 27% share of total U. S. music sales. Amazon. com was the second-largest seller of digital music in the United States with only an 8% market share. Amazon. com and Walmart were tied for second in total U. S. usic sales with 12% market shares. Apple’s competitive position in the smartphone industry is also stronger than its position in the computer history. However, it is still a distant second in the market to RIM’s Blackberry as RIM had 41. 7% of the market in May 2010 compared to 24. 4% for Apple. Apple also must keep a careful watch on the Android operating system phones as they have grown from 2. 5% in September 2009 to 13% in May 2010. Recently, Apple has continued to forge ahead in the smartphone industry because of the loyalty it has created by users of it other products (iPad) and the integration between each.
4. Does it make good strategic sense for Apple to be a competitor in the computer, personal media player, smartphone, and tablet computer industries? Are the value chain activities that Apple performs in computers, personal media players, tablet computers and smartphones very similar and “compatible” or are there very important differences from product to product? Which of the four products lines---computers, tablet computers, personal media players, or smartphones--- do you think is most important to Apple’s future growth and profitability? Why?
I believe it does make strategic sense for Apple to compete in the computer, personal media player, mobile phone, and table computer industries. Apple’s core business, which is designing and manufacturing computers, has helped them enjoy long-term success in some of its other divisions. For example, Apple discovered the touch screen technology that was used in its iPhone when exploring new technologies for its computers. Also, iTunes was initially developed for use on Apple’s computers but was quickly adapted to be used with iPods. This maneuver helped Apple to become a dominant player in the digital music industry.
As one can see, sometimes there have definitely been some advantages to competing in all four of these industries. There are similarities in Apple’s value chain activities when comparing its computer, digital music player, tablet computers, and mobile phone activities. All divisions can share the research and development, physical building and equipment, and human resources. The research and development has been the biggest contributor to Apples success because of the differentiation in each of Apples products and this department can benefit from working with the individuals in the other three industries.
Much of the technology developed for one of its product lines has been in or used to build the popularity of its other products. Although Apple’s operations are different for each product due to the significant differences in product specifications such as size and function. The specifications and value chain similarities for non-computer Apple products are very similar with some versions of the iPod and the iPhone. Also, the iPad has a number of value chain matchups with the iPod Touch and iPhone as they all share the same applications. One could argue that all four product lines are important to Apples future growth and profitability.
Apple’s dominance in the personal media player industry makes it very important to Apple’s long-term success. Apple has also enjoyed some success in the smartphone industry, which is a booming market right now. Apple could still make some improvements in the way it competes in the computer market, but I think the potential is too great to ignore. Also Apple exploded onto the tablet computer market, which is very promising to the future in the industry.
5. What is your assessment of Apple Computer’s financial performance the past three years? (Use the financial ratios in Table 4. of the text (pages 94-96) as a guide in doing your financial analysis. ) In looking at the table above it is easy to see that Apple has been able to come through the recent recession a lot stronger than a lot of other companies. It has been able to do so because of its sound strategy and quality products. Even though sales revenue growth slowed drastically in 2009, the other profitability measures have remained strong. It would be hard to expect Apple to keep up the revenue growth experienced in 2006 and 2008 with revenues growing by 38. 7% and 35. 3% respectively.
According to the case study Apple reported its highest-ever quarterly sales figure in the third quarter of 2010 with revenues of $15. 7 billion compared to $8. 34 billion for the same quarter the previous year. Apple also shipped a record 3. 4 million computers during the quarter, which was up from 2. 6 million computers shipped in the same quarter in 2009. iPod revenues increased by 4% to reach $1. 5 billion for the quarter. The company also sold 8. 4 million iPhones during the third quarter of 2010, which was a 61% increase over the same period in 2009.
6.What recommendations would you make to allow Apple to strengthen its position in its most important markets? What steps should it take to ensure that the iPad becomes a success in the marketplace and a major contributor to the company’s overall performance? In the personal media player industry it would be hard to make any recommendations to a company that already is at the top. However, I would urge them to stay innovative and continue to be the first one to bring new features to the industry. I would also suggest that they recognize the importance of iTunes and to not lose focus on seamless integration between the two.
When it comes to the personal computer industry, I would make two big recommendations to Apple in an effort to strengthen its position. The first is to find a way to let consumers customize their machines. This is a huge reason why Dell has been such a strong player in this industry. The second is for Apple to find a way to lower products costs, which would enable it to lower prices for its computers. Apple’s price point is at the very top of the market, which makes it computers too expensive for many consumers to buy. In the mobile phone industry Apple must continue to keep pace in the technology race.
It is a highly competitive market, and it can’t afford to fall behind. Apple must continue to be innovative, yet at the same time not make mistakes like that with the iPhones’s antenna design. It must make it products available in as many markets as possible by developing partnerships with distributors worldwide. Apple also needs to develop several models of the iPhone, so it can meet the needs of diversified customers. The last recommendation I would make is to continue to develop more apps, which has been a huge selling point for Apple. Apple made a huge entrance into the tablet computers market with the release of the iPad.
In order for it to be a major contributor to Apples success in the long-run, Apple needs to find a way to reduce the price of the iPad. This means they need to lower production costs. The cost of the iPad eliminates many potential customers from being able to afford it. Also as with their other products, they need to continue to be innovative and be first to the market with new features and applications to entice consumers to purchase its products. Like many of the other product lines that Apple is in, the table computer market looks to be very competitive.
7.Normally I keep these questions within the time frame of the case. However, given the death of Steve Jobs, what effect do you think that will have on Apple’s strategic future? I think the death of Steve Jobs will have a huge impact on the strategic future of Apple. I don’t foresee many changes in the short term, as Apples sound strategic plan should guide it for the next couple of years. However, I think there will definitely be a negative effect in the long term as Steve Jobs was well known for consistently pushing for innovative new ideas and products and not being afraid to make structural changes.
His successful track record gave him the respect needed by others to push these sometimes-questionable actions forward. Steve was the type of leader that was always thinking about the next big thing and never rested on his laurels, nor did he let his employees. Apple will need someone to step forward and be as forward thinking as Mr. Jobs in order to continue to be an industry leader. Apple has already established a very loyal, large group of customers, so it will be given a chance to transition to its new leadership and develop a new strategic future.